A benefit that domestic outsourcing can never match is provided by sourcing goods internationally. Since 2009, China has been the top exporter in the world expanding trade ties with both developed and developing nations.
The export companies in China are able to achieve the strict deadlines that international corporations operate on, thanks to integrated logistics chains, world-class infrastructure, and a skilled labour force.
Despite an unprecedented COVID-19 outbreak, China is projected to continue to be a major source of goods for the world market.
To maximise business, the entire world is either purchasing products from China or shifting production there. Since they are inexpensive there, China is a great spot to purchase the proper items.
China is currently undergoing changes, nevertheless. Even for tiny enterprises that virtually only conduct business with China, slowing growth, rising expenses, and increased limitations on global online access are all having an impact.
This article looks at various product sourcing strategies in China that may help you save some money over the course of the year as the business environment gets worse.
1. Visit the China trade fairs
The same supplier has been working with numerous overseas customers for many years. By attending events like the incredibly influential Guangzhou Trade Fair, which has been showing goods to international customers since 1957, many contacts have been forged.
The Fair, which was mostly supported by funds from Hong Kong businessmen, started off as the Canton Trade Fair and gradually evolved into a manufacturing centre for China.
Middlemen, who add a significant portion to the true buying price and are frequently produced by manufacturers currently in the industrial heartland of China, control the majority of the Fair.
Today, many Chinese manufacturing facilities are in cities like:
Although the wages are far lower, the levels of output and quality are comparable. Nowadays, in China, it pays to compare prices.
2. Talk about the crisis
When interacting with the supplier, do not hesitate to discuss the financial condition. Ask for a discount even though he is very likely already aware of it, don't be shy about mentioning it.
When dealing with the marketplace, the seller always gives in. Contacting the seller is not something to be afraid of. You can reduce the price by at least 10% by doing this.
3. Replace materials
If you are dealing directly with export companies in China, then ask them to swap out some parts for alternatives. You lower the price of the goods while maintaining quality as a result.
Due to its lower cost and environmental friendliness, eco-packaging is becoming more and more popular. Some manufacturers don't provide these options.
4. Don’t use bulky packaging
Some items can be transported without packing. A single box containing the entire shipment should be used, and soft material should be used to cover it.
Some packages do not shield the cargo during shipping; instead, they add more volume (which raises the price). So, try to reduce such packages.
Since the China-ASEAN Free Trade Agreement went into force in 2009 and eliminated import taxes on 90% of products flowing from ASEAN into China, the costs of buying in China should have decreased during the past ten years.
Inquire about any tariff transfers that may have occurred.
Feel free to play head games if those production savings made are not being passed on, since products made in China now contain components that can be purchased more affordably in other regions of Asia. Find a new supplier if the cost of your China purchases has increased.
6. Request instalments
It is acceptable to request instalment payments once you have had a working connection with a supplier for a longer time (typically more than a year) and feel confident in doing so.
This kind of service is quickly gaining popularity and enables you to expand your business while lowering the risk of investing in subpar goods.
7. Increase production
Make sure the delivery is in a high quantity. As a result, you will get a reasonable delivery charge and the goods will be shipped more cheaply.
You can store a lot of merchandise in a special warehouse, where it can be quickly sold for a profit. As a result, you should spread out your investments rather than using the entire sum at once.
8. Designate someone to collect your cargo
Request that the supplier ship the items to the Chinese warehouse of the shipping business.
The safety of your cargo must be guaranteed by your supplier, so an untrusted business cannot be suggested. The sender will typically be accountable for all expenses.
9. Perform direct duties
Find a supplier in China and communicate with him directly if you require a wide choice of products. A sourcing agency can assist you in locating a supplier with reasonable prices. By eliminating intermediaries, you can cut costs by up to 20%.
10. Schedule delivery a minimum of 90 days in advance
Most of the time, it takes between 20 and 35 days to make and deliver the goods. Plan your delivery at least 6 months in advance to ensure that you receive the goods on time. An excellent example would be to buy summer products in December.
11. Utilize container shipping
In general, there are lots of options to ship and deliver items from China. It is a time-saving, cost-effective, and trustworthy delivery technique.
You can select your route and track the movement of your items in real-time. The two biggest ports in China allow for the delivery of products anywhere in the world:
This way of transportation is lengthy compared to other routes, but it is dependable and affordable.
12. Explore double tax treaty benefits
If you establish an operation, even a trading company or other legal organisation, are utilising it to source products and pay in RMB, double tax treaty advantages may apply to your business.
These bilateral agreements really include measures that can assist you lower import duties from China, despite the off-putting label "Double Tax" (25%, plus another 10% dividend tax).
They accomplish this by including clauses for withholding tax, which is sometimes referred to as "technical service fees." Under these clauses, service fees paid to your China subsidiary by your parent company, such as royalties, trademarks, and patents, or "technical assistance," are subject to a lower tax rate than the CIT rate.
A 10% withholding tax fee is typically permitted by double tax treaties; this is generally a better option than leaving the earnings in China for the China Profits Tax guy to seize.
Does your nation and China have a double tax treaty? You can find out through the various resource library. What has been a wholly Chinese play for almost three decades is now beginning to show its age.
There are an increasing number of new suppliers emerging in Asia's less-priced cities as well as in China. Many factories in China have simply relocated to China's second and third-tier towns, where labour costs are lower, from Guangdong and Shanghai, once the country's primary manufacturing hubs.
Some of them have moved to Vietnam with complete assembly lines. In reaction to growing production costs in China, factories have moved.
However, at least from the adjacent ASEAN trading bloc, import taxes into China have mostly been eliminated, and China's use of double tax treaties gives a more practical yet technological method to removing tax expenses.
Sourcing from China have never been so simple or affordable. Maintaining your competitive edge is made easier by following these trends.
13. Ensure your cargo is insured
If you have cargo insurance, you are guaranteed to be safe on the road and to receive your goods on schedule. Insurance will cover any eventualities along the route, so your business will not suffer damages.
You have the option to select advantageous Incoterms and settle any disputes with the vendor.
14. Use sourcing agents
You must have heard of China sourcing agents if you have been considering buying things from China. A sourcing agent is a person who assists you in locating suppliers abroad.
It could be a small business, an organisation, or a major corporation that provides services for product sourcing.
Even after you have signed the manufacturing agreement, the agent's services can still be required. Most sourcing agencies can assist you in providing high-quality goods at affordable prices.
An external entity that functions as an extension of your internal business team is what an international purchasing agent essentially is. You are assessed a commission by the business, which is deducted from the total order amount.
Purchasing representatives who work for a manufacturing bill the manufacturer a commission. They are trade firms that locate customers looking for particular products for the factories in their network.
By employing all these suggested tips, you can reduce logistics cost from your export companies in China without harming the cargo.